The Ultimate Guide to Tax Preparation
Tax season is already here again. With more rules, regulations, scams, and possible mistakes than ever, filling your taxes is a scary endeavor. We’ve got your ultimate guide to tax preparation that’ll help you every step of the way.
Know Your Dates
When preparing to file taxes, the mountain of documents and things to remember can seem intimidating. There are steps that need to be checked off, and knowing your dates and deadlines is important to get everything done accurately and on time.
Here are some important tax season dates:
Jan. 23, 2017: Tax season begins. Tax software companies, preparers, and individual taxpayers may begin filing on this day.
Jan. 31, 2017: Forms W-2 and 1099 due from employer to employee.
Feb. 15, 2017: The date that refunds claiming the Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC) will be released (If they filed immediately on January 23).
Feb. 27, 2017: The date that taxpayers will have access to their tax refunds filed with the EITC and ACTC (If they filed immediately on Jan. 23). These tax refunds are being delayed to protect taxpayers from a variety of tax scams.
Apr. 18, 2017: The filing deadline for 2016 tax returns. The traditional tax filing deadline is April 15, but this year, that date falls on a Saturday. Normally, that would push the deadline to the following Monday, but Emancipation Day – a legal holiday in the District of Columbia – is observed that day and pushes the filing deadline to Tuesday, April 18.
If you are filing online, your return must be submitted (but not accepted) by this date. If you are mailing a paper copy of your taxes, they must be postmarked by this date.
Oct. 17, 2017: The extended tax deadline. If you need more time to get your tax information together, you may file for an automatic six month extension by the regular tax deadline, April 18.
Understand Your Money and Gather Your Documents
The first step to filing your taxes is always gathering all of the forms and paperwork that you need. To file your taxes, you must report all income you received from January 1 to December 31, 2016. That means gathering W-2 forms from any employer you worked for, 1099-MISC forms for any freelance work, and forms that are applicable for bank interest received, student loan interest paid, mortgages, investment interest, charitable contributions and business expenses. To find a full list of forms, you can visit the IRS website.
Assess Your Part in the “Gig Economy”
The gig economy is a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs, and a large part of the work force works at least part time in the gig economy. If you drive an Uber or Lyft, take on freelance side projects, or make up your income with a variety of different gigs, you are part of the “gig economy” and need to learn about the tax issues and deductions that come with it. You can visit the IRS website to get all of the information you’ll need on the self-employment tax, home office deductions, business supplies, car expenses, and other business expense deductions. Though there are many benefits to be had for the self-employed, make sure you thoroughly research requirements to avoid tax penalties for inflated deductions.
Research Tax Breaks and Penalties
There are tax breaks out there for just about everything – from being a business owner to getting married. However, filling for breaks that don’t actually apply to you can get you in big trouble with the IRS. Do your research on what benefits you actually qualify for, and know the penalties for using them incorrectly. The most important thing to keep in mind when filing your taxes is that they must be filed with the most up to date, accurate information possible. If you do that, you’ve got nothing to worry about.
Decide How You Want to File
If you choose to file over the Internet, by far the most popular choice amongst taxpayers, you have three options: File for free on the IRS website, file using trusted commercial software, or file using an authorized e-file provider that you also can find through the IRS.
If you decide you’d like to free file, head over to the IRS website to make sure you qualify. Chances are that you do – over 100 million people qualify in the United States. If you do fit the bill, you can visit IRS.gov/freefile. From there, select the partner software that works the best for you and file for free on that provider’s website.
If you choose to use commercial tax preparation software like TurboTax or H&R Block, you can file independently on their website. These sites make it very easy to file, as they walk you through each step needed and check for accuracy along the way. A lot of the time, these sites do require a fee to process and deliver your return, but some people consider it a fair trade for ease of use.
The last electronic filing option is to file through an e-file provider. This means that you’ll go to a physical location where you’ll use a tax preparer certified as an e-file provider, who can file your return online for you. The IRS website has a list of these providers.
If you’re more of a pen and paper person, you can still file your taxes the old fashioned way – through the regular mail. To file this way, you’ll print all of the applicable forms, fill them out, and then mail them to the address specified for your state on the IRS website. Remember, if you’re filing this way, your final, completed tax return must be postmarked by April 18 to avoid late filing penalties.
File with a Tax Preparer
If you’re uncomfortable doing your own tax paperwork, you have the option to work with a professional tax preparer. The IRS website can help you find a preparer with an IRS Preparer Tax Identification Number (PTIN), which ensures that you won’t be taken advantage of by an ill-willed tax preparer. The IRS warns that, although everyone listed on their site does have a PTIN, tax preparers often have different skill, education, and experience levels, so doing your research is still very important. Once you find a preparer you trust, the work is up to them. Most preparers do charge a fee for their services.
Check, Check, and Check Again
Always double check your tax return once you’ve got it prepared. Having the most accurate return is very important to ensure that you get the tax refund you deserve and that the IRS doesn’t determine that you’ve committed tax return fraud.
Track Your Refund
It’s a good idea to keep an eye on the status of your tax return to make sure nothing goes amiss. For instance, if you see that your refund has been issued, but you haven’t received it after an appropriate amount of time, it may be time to get in touch with your bank and the IRS. To track your tax refund, visit the IRS website.
Maintain Your Files
It’s standard practice to hold onto all tax documents – including W-2 forms, 1099s, and tax return paperwork – for seven years. Make paper copies in addition to your electronic ones for safekeeping in your records.
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